Strong GBP and European Crisis Paint Gloomy UK Exports

A strong pound and turmoil in the eurozone have left British manufacturers at their gloomiest for almost four years on demand for exports, according to a business survey.

In the latest evidence that exporters are facing a number of challenges, the CBI’s latest quarterly snapshot of manufacturers suggested new overseas orders picked up in the three months to July but that the outlook is gloomier. It highlighted the rise in sterling, which continues to make UK goods more expensive to overseas buyers.

The poll of 445 companies showed 26% of manufacturers expect total new orders to increase over the coming quarter, compared with 18% that expect them to decrease. The resulting net balance of +8% is the lowest since October 2012.

The big drag on order expectations comes from exports rather than domestic sales, with more manufacturers expecting a drop (28% of them) in overseas orders than those that expect a rise (21%). The resulting balance of -7% is the lowest since October 2011.

In addition to the stronger pound, which earlier this month hit a seven-and-a-half-year high against a basket of other currencies, companies also cited unhelpful political and economic conditions in some export markets.

“Manufacturers are continuing to feel the pressure from the stronger pound. Greater buoyancy in exports remains a missing element from the UK’s recovery,” said Katja Hall, CBI deputy director general.

via The Guardian

Alfonso Esparza

Alfonso Esparza

Senior Currency Analyst at Market Pulse
Alfonso Esparza specializes in macro forex strategies for North American and major currency pairs. Upon joining OANDA in 2007, Alfonso Esparza established the MarketPulseFX blog and he has since written extensively about central banks and global economic and political trends. Alfonso has also worked as a professional currency trader focused on North America and emerging markets. He holds a finance degree from the Monterrey Institute of Technology and Higher Education (ITESM) and an MBA with a specialization on financial engineering and marketing from the University of Toronto.
Alfonso Esparza